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POPULAR FOREX TRADING INDICATORS

And Some Lesser Known, Advanced Indicators

By Your Trading Mentor,

Trading Angel

Forex trading is a challenging activity that requires traders to analyse market trends and make informed trading decisions. One of the tools that traders use to analyse the market is indicators. Indicators are mathematical calculations based on a currency pair’s price and/or volume. When I first started trading forex I was completely obsessed with indicators as I though there was sure to be one which was the holy grail and told me the exact moment to buy and sell! I realised pretty quickly this was ridiculous. These days I’m actually more of a price action girl myself whilst also being really keen on fundamental analysis and macro economics. Having said that, technical indicators still have their place and can be useful tools either to give you a binary set of rule for your trading plan or also to give you some key information which will help you to analyse how the market is moving and there for how it is likely to move in the future 

In this blog post, we will discuss the advantages of using indicators in forex trading, I will also compare technical indicators to price action trading. 

THE ADVANTAGES OF TECHNICAL INDICATORS 

1. Identify Trends

Indicators can help traders identify trends in the market. By analysing past price movements, traders can determine if a currency pair is trending up or down. Trend-following indicators, such as moving averages, can help traders identify the direction of the trend. This can help traders make informed trading decisions and enter/exit trades at the right time.

2. Confirmation of Price Movements

Indicators can confirm price movements in the market. For example, if a currency pair’s price is increasing, but the RSI indicator is showing that it is overbought, traders may consider selling the currency pair. This is because the RSI is indicating that the price is due for a correction. Indicators can help traders confirm whether the price is overbought or oversold and identify potential entry and exit points for trades.

3. Risk Management

Indicators can help traders manage their risk. By using indicators to set stop-loss orders and take-profit levels, traders can limit their losses and maximise their profits. For example, if a trader enters a long position, they may set a stop-loss order at a level below the entry price. This can help minimise losses if the trade goes against them.

4. Objective Analysis

Indicators can provide traders with objective analysis. Unlike emotions, indicators do not change based on a trader’s mood or bias. They provide traders with objective information that can help them make informed trading decisions. This can help traders avoid impulsive decisions based on emotions, which can lead to losses.

5. Scalping and Day Trading

Indicators can be particularly useful for scalping and day trading. These trading strategies involve making multiple trades within a short period. Indicators can help traders identify potential entry and exit points for trades, and confirm the strength of a trend. This can help traders make quick decisions and execute trades efficiently.

Indicators are useful tools for forex traders. They can help identify trends, confirm price movements, manage risk, provide objective analysis, and aid in scalping and day trading. However, it is essential to note that no indicator can guarantee trading success, and traders should use a combination of indicators and other analysis tools to make informed trading decisions.

COMPARING PRICE ACTION TO INDICATORS

Technical indicators and price action analysis are two of the most popular methods used to analyse the market. I will now compare the benefits of technical indicators in forex trading to price action analysis.

Technical Indicators

Technical indicators are mathematical calculations based on a currency pair’s price and/or volume. Traders use these indicators to identify trends, confirm price movements, manage risk, and provide objective analysis. Here are some benefits of using technical indicators:

1. Objective Analysis: Technical indicators provide traders with objective analysis. Unlike emotions, indicators do not change based on a trader’s mood or bias. They provide traders with objective information that can help them make informed trading decisions.

2. Confirmation of Price Movements: Indicators can help traders confirm price movements in the market. For example, if a currency pair’s price is increasing, but the RSI indicator is showing that it is overbought, traders may consider selling the currency pair. This is because the RSI is indicating that the price is due for a correction.

3. Risk Management: Indicators can help traders manage their risk. By using indicators to set stop-loss orders and take-profit levels, traders can limit their losses and maximise their profits.

Price Action Analysis

Price action analysis is a method of analysing the market by studying the movement of price itself, without relying on technical indicators. Here are some benefits of using price action analysis:

1. Simplicity: Price action analysis is a simple method of analysing the market. It involves studying candlestick charts and identifying patterns and trends in the price movement.

2. Flexibility: Price action analysis is a flexible method of analysing the market. Traders can use it on any currency pair and any timeframe.

3. Real-time Analysis: Price action analysis provides traders with real-time analysis of the market. Traders can quickly identify potential entry and exit points for trades based on the current price movement.

Comparison

Both technical indicators and price action analysis have their benefits in forex trading. Technical indicators provide objective analysis, confirmation of price movements, and risk management. Price action analysis, on the other hand, is a simple and flexible method of analysing the market that provides real-time analysis.

Ultimately, the choice between technical indicators and price action analysis depends on the trader’s trading style and preferences. Some traders prefer to use technical indicators to confirm price movements and manage risk, while others prefer to use price action analysis to identify patterns and trends in the price movement. It is important to note that no single method can guarantee trading success, and traders should use a combination of methods and analysis tools to make informed trading decisions.

FOREX TRADING INDICATORS

POPULAR TECHNICAL INDICATORS 

Forex trading indicators are tools used by traders to analyse market trends and make informed trading decisions. There are numerous indicators available, and each one serves a specific purpose. Here I will discuss some of the most popular forex trading indicators.

1. Moving averages

Moving averages are one of the most widely used indicators in forex trading. They are used to identify trends and determine the direction of the market. Moving averages come in different forms, such as simple moving averages and exponential moving averages. Traders often use them to identify support and resistance levels, and to determine entry and exit points for trades.

2. Relative strength index (RSI)

The RSI is a momentum indicator that measures the strength of a currency pair’s price action. It oscillates between 0 and 100, with readings above 70 indicating overbought conditions and readings below 30 indicating oversold conditions. Traders use the RSI to determine when to enter or exit a trade, and to confirm the strength of a trend.

3. Bollinger Bands

Bollinger Bands are a volatility indicator that consists of three lines. The middle line is a moving average, and the upper and lower lines are two standard deviations away from the moving average. Traders use Bollinger Bands to identify potential breakouts and trend reversals. When the price of a currency pair moves outside the upper or lower band, it is considered to be a potential trading opportunity.

4. Fibonacci retracements

Fibonacci retracements are a technical analysis tool used to identify levels of support and resistance. They are based on the Fibonacci sequence, which is a mathematical pattern found in nature. Traders use Fibonacci retracements to identify potential entry and exit points for trades, as well as to determine profit targets and stop-loss levels.

5. MACD

The MACD (Moving Average Convergence Divergence) is a trend-following momentum indicator that measures the difference between two moving averages. It consists of a MACD line and a signal line, which are used to identify potential entry and exit points for trades. Traders also use the MACD to confirm the strength of a trend and to identify potential trend reversals.

In conclusion, there are numerous forex trading indicators available, and each one serves a specific purpose. Moving averages, RSI, Bollinger Bands, Fibonacci retracements, and MACD are some of the most popular indicators used by traders. It is important to note that no single indicator can guarantee trading success, and traders should use a combination of indicators and other analysis tools to make informed trading decisions.

PERHAPS SOME LESSER KNOWN TECHNICAL INDICATORS 

While most traders use popular indicators like moving averages, MACD, and RSI, there are also several lesser-known advanced indicators that can provide valuable insights into market trends and price movements. In this blog post, we’ll explore some of these lesser-known advanced forex trading indicators.

1. Ichimoku Cloud

The Ichimoku Cloud is a technical analysis indicator that was developed by Japanese journalist Goichi Hosoda in the 1930s. It consists of five lines that provide a comprehensive view of price action, including momentum, trend direction, and support and resistance levels. The five lines are:

– Tenkan-sen: A 9-period moving average of the highest high and lowest low over the past 9 periods.

– Kijun-sen: A 26-period moving average of the highest high and lowest low over the past 26 periods.

– Senkou Span A: The average of Tenkan-sen and Kijun-sen, plotted 26 periods ahead.

– Senkou Span B: A 52-period moving average of the highest high and lowest low over the past 52 periods, plotted 26 periods ahead.

– Chikou Span: The closing price of the current candle, plotted 26 periods behind.

The area between Senkou Span A and Senkou Span B is known as the Ichimoku Cloud or Kumo. The thickness of the cloud indicates the strength of support and resistance levels.

2. Fibonacci retracements

Fibonacci retracements are based on the idea that markets tend to retrace a predictable portion of a move, after which they will continue to move in the original direction. This indicator uses horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before the price continues in the original direction. The key levels are 23.6%, 38.2%, 50%, 61.8%, and 100%.

3. Elliot Wave Theory

Elliot Wave Theory is a complex technical analysis indicator that involves identifying patterns in market movements. It is based on the idea that markets move in waves, with each wave consisting of a series of smaller waves. The theory identifies five waves in the direction of the trend, followed by three corrective waves. Traders use Elliott Wave Theory to identify potential entry and exit points.

4. Volume Profile

Volume Profile is a tool that displays the volume traded at each price level over a specified period. This information can be used to identify areas of support and resistance, as well as potential entry and exit points. Volume Profile can also help traders identify areas of high liquidity, which can be useful when placing orders.

5. Relative Vigor Index (RVI)

The Relative Vigor Index is a momentum indicator that compares the closing price to the trading range over a specified period. It is designed to measure the strength of a trend and to identify potential trend reversals. The RVI is calculated by subtracting the closing price from the opening price and dividing the result by the trading range. The result is plotted on a scale from 0 to 100.

In conclusion, these lesser-known advanced forex trading indicators can provide valuable insights into market trends and price movements. However, traders should be cautious when using these indicators, as they can also generate false signals. It is important to thoroughly research each indicator and to test it before incorporating it into a trading strategy.

If you’re wondering what my favourite indicator is, at the moment I would say it is the Smart Money Concepts Indicator on TradingView. If you don’t already have a TradingView account it is my favourite place to do my technical analysis, you can sign up and trial the pro version for free for a month using this link. Just don’t forget to cancel before the month is up if you don’t want to go ahead with your subscription 

https://www.tradingview.com/?offer_id=10&aff_id=25988

Until next time, Happy Trading,

Love From Your Trading Mentor,

Trading Angel x

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DO YOU HAVE TO BE GOOD AT MATHS TO BE A FOREX TRADER? 

By Your Trading Coach

Trading Angel 

MY MATHS IS PROBABLY SLIGHTLY BETTER THAN AVERAGE – BUT NOT BY MUCH 

One of the questions I get asked the most as a forex trading coach is if you have to be really good at maths to be a forex trader. This is one of the limiting beliefs which stops a lot of people actually starting to trade forex in the first place. To be honest, I’m ok at maths, but keep reading if you’re not because I don’t actually think being a maths genius is as important as you may think it is in forex trading. To paint a full picture of my maths ability I got an A at GCSE (not an A* like my sister who is an actual maths genius and went on to take an A-Level in maths) When I declared I was going to take maths for A-Level because I’d found it relatively easy up to that point in my life, my teacher told me that I’d probably peaked at GCSE and not to bother because I probably wouldn’t get very far with it. My sister found this hilarious. I was more relieved then disappointed and any formal training in maths ended there at the age of 16. I can add, subtract, multiply and divide very basic small numbers but don’t throw any weird numbers my way unless you have a calculator, a pen and paper and several minutes on your hands. 

LEARNING FANCY EQUATIONS IN FOREX IS A WASTE OF TIME 

It may look like there is a lot of numbers involved in forex trading but the truth is you don’t actually need to do any complicated equations with them. The big decision which you need to make when forex trading is whether to buy or sell (or sit on your hands) and that’s based on whether you think the market is going to go up or down. One of my very first ever mentees got very flustered and tearful one day while she was desperately trying to figure out the pip value of every single forex pair each time it changed value, and I cannot emphasise enough how completely unnecessary it is to do this. I introduced her to a wonderful tool called a pip calculator and she’s never asked me how to do that pointless equation again. For the record, I use an online pip calculator which is free and easy to use, link below (no affiliation) but there are also plenty of apps available, I believe one called Stinu is very popular for calculating the pip value of a currency pair. 

https://www.forextime.com/uk/trading-tools/trading-calculator/pip-calculator

PLACING A TRADE IS NOT LIKE A MATHS EXAM AT SCHOOL 

So as I mentioned, your main job as a forex trader is to decide if the market is going up or down and if you want to buy or sell, it is not to figure out the exact pip value of every single forex pair every time it moves up or down. AND there are pip calculators available AND you’re allowed to use them because funnily enough, the fact that you were terrible at maths at school and failed your exam when you weren’t allowed to use your calculator, doesn’t mean much in the real world of forex trading, because you are allowed to use a calculator. I actually encourage it!!

SOME BASIC MATHS IS A PLUS (pun intended) 

While its not essential to getting the direction right when placing a trade, some basic maths ability is useful when figuring out stop losses, take profits and also recording the information in your trading journal and then reflecting on this information. If you genuinely find it impossible to add or subtract 20 or 50 then you may struggle with figuring out some aspects of risk management. For example, if you know that you want to place your stop loss 52 pips away from entry on a sell position on EURUSD and the current price is 1.0579 then that means your stop loss goes at 1.0631. My top tip if you struggle with these sort of sums is to just remove the decimal place when putting it in your calculator and type in 10579 plus 52. If you wanted your take profit to go 3 times the distance of your stop loss away from entry giving you a risk to reward ration of 1:3 then you would multiply 52 by 3 giving you 156 and then you would take this number away from 10579 giving you 10423 so your take proft goes at 1.0423. Don’t worry I used a calculater on this and double checked the chart, no maths was done in my head. You also have the option of using a really clever little tool in TradingView called the position tool and for this is will actually do the maths for you by showing you were your stop loss and take profit go. By the way if you are new to trading then I couldn’t recommend TradingView enough for the place to do all of your charting and analysis, I’ve been using it since day one and have never looked back. Best thing is you can use it for free as long as you don’t mind the incessant pop ups, or if you want to trial the Pro version (about £11 a month) you can test it out for a month for free and cancel if you don’t like it using this link: 

https://www.tradingview.com/?offer_id=10&aff_id=25988

So, to conclude, you definitely don’t need to be a maths genius in order to be a forex trader so if that is what’s holding you back you can rule it out as an excuse now! Some basic maths does help so if you are genuinely terrible and struggle with basic sums you may find setting stop losses and profits a little bit tricky at first but even then you’ll probably get used to this side of things with a bit of practice. 

Happy Trading! 

Love from, Your Trading Coach x

Read More

DO YOU HAVE TO BE GOOD AT MATHS TO BE A FOREX TRADER? 

By Your Trading Mentor 

Trading Angel 

MY MATHS IS PROBABLY SLIGHTLY BETTER THAN AVERAGE – BUT NOT BY MUCH 

One of the questions I get asked the most as a forex trading mentor is if you have to be really good at maths to be a forex trader. This is one of the limiting beliefs which stops a lot of people actually starting to trade forex in the first place. To be honest, I’m ok at maths, but keep reading if you’re not because I don’t actually think being a maths genius is as important as you may think it is in forex trading. To paint a full picture of my maths ability I got an A at GCSE (not an A* like my sister who is an actual maths genius and went on to take an A-Level in maths) When I declared I was going to take maths for A-Level because I’d found it relatively easy up to that point in my life, my teacher told me that I’d probably peaked at GCSE and not to bother because I probably wouldn’t get very far with it. My sister found this hilarious. I was more relieved then disappointed and any formal training in maths ended there at the age of 16. I can add, subtract, multiply and divide very basic small numbers but don’t throw any weird numbers my way unless you have a calculator, a pen and paper and several minutes on your hands. 

LEARNING FANCY EQUATIONS IN FOREX IS A WASTE OF TIME 

It may look like there is a lot of numbers involved in forex trading but the truth is you don’t actually need to do any complicated equations with them. The big decision which you need to make when forex trading is whether to buy or sell (or sit on your hands) and that’s based on whether you think the market is going to go up or down. One of my very first ever mentees got very flustered and tearful one day while she was desperately trying to figure out the pip value of every single forex pair each time it changed value, and I cannot emphasise enough how completely unnecessary it is to do this. I introduced her to a wonderful tool called a pip calculator and she’s never asked me how to do that pointless equation again. For the record, I use an online pip calculator which is free and easy to use, link below (no affiliation) but there are also plenty of apps available, I believe one called Stinu is very popular for calculating the pip value of a currency pair. 

https://www.forextime.com/uk/trading-tools/trading-calculator/pip-calculator

PLACING A TRADE IS NOT LIKE A MATHS EXAM AT SCHOOL 

So as I mentioned, your main job as a forex trader is to decide if the market is going up or down and if you want to buy or sell, it is not to figure out the exact pip value of every single forex pair every time it moves up or down. AND there are pip calculators available AND you’re allowed to use them because funnily enough, the fact that you were terrible at maths at school and failed your exam when you weren’t allowed to use your calculator, doesn’t mean much in the real world of forex trading, because you are allowed to use a calculator. I actually encourage it!!

SOME BASIC MATHS IS A PLUS (pun intended) 

While its not essential to getting the direction right when placing a trade, some basic maths ability is useful when figuring out stop losses, take profits and also recording the information in your trading journal and then reflecting on this information. If you genuinely find it impossible to add or subtract 20 or 50 then you may struggle with figuring out some aspects of risk management. For example, if you know that you want to place your stop loss 52 pips away from entry on a sell position on EURUSD and the current price is 1.0579 then that means your stop loss goes at 1.0631. My top tip if you struggle with these sort of sums is to just remove the decimal place when putting it in your calculator and type in 10579 plus 52. If you wanted your take profit to go 3 times the distance of your stop loss away from entry giving you a risk to reward ration of 1:3 then you would multiply 52 by 3 giving you 156 and then you would take this number away from 10579 giving you 10423 so your take proft goes at 1.0423. Don’t worry I used a calculater on this and double checked the chart, no maths was done in my head. You also have the option of using a really clever little tool in TradingView called the position tool and for this is will actually do the maths for you by showing you were your stop loss and take profit go. By the way if you are new to trading then I couldn’t recommend TradingView enough for the place to do all of your charting and analysis, I’ve been using it since day one and have never looked back. Best thing is you can use it for free as long as you don’t mind the incessant pop ups, or if you want to trial the Pro version (about £11 a month) you can test it out for a month for free and cancel if you don’t like it using this link: 

https://www.tradingview.com/?offer_id=10&aff_id=25988

So, to conclude, you definitely don’t need to be a maths genius in order to be a forex trader so if that is what’s holding you back you can rule it out as an excuse now! Some basic maths does help so if you are genuinely terrible and struggle with basic sums you may find setting stop losses and profits a little bit tricky at first but even then you’ll probably get used to this side of things with a bit of practice. 

Happy Trading! 

Love from, Your Trading Mentor x

Read More